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A Prospect for Vietnams Software Industry:
A Case of FPT Software
April 2008
Heejin Lee
(Graduate School of International Studies, Yonsei Universit!
Seun"#$on %an"
(&epart'ent of Lo"istics and Infor'ation Sste', Sun"#on"hoe Universit!
Suli' H$an"
(Graduate School of International Studies, Yonsei Universit!
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Abstract
ollo$in" India)s success to *e a 'ajor soft$are product and service provider, 'an
developin" and transitional econo'ies includin" +ietna' ta#e soft$are industr as a strate"ic
one for econo'ic develop'ent -his strate" poses those developin" countries 'an
challen"es for the' to address, and 'an fir's in those countries are stru""lin" to continue
$ith the strate" at the corporate level and survive in the co'petitive $orld soft$are 'ar#et
A'on" those fir's, .- Soft$are, the leadin" +ietna'ese soft$are co'pan, is one of the
fe$ non/Indian co'panies e'er"in" as a si"nificant plaer in the "lo*al soft$are outsourcin"
'ar#et, at least in that of the Asia .acific re"ion -his paper ai's to investi"ate $hat *rou"ht
.- Soft$are a success or this purpose, $e first ea'ine the +ietna')s I1- and soft$are
industr, and identif #e success factors of .- Soft$are
+ietna' has *een sho$in" a hi"h "ro$th in I1- industr $hich is a strate"ic one for its
econo'ic develop'ent In particular, +ietna' has a potential to *e successful in offshore
soft$are outsourcin" -o *e sustaina*le in this co'petitive 'ar#et, +ietna' has to overco'e
so'e $ea#nesses .- Soft$are as the *est achiever so far is a "ood 'odel for +ietna'ese
soft$are co'panies e have found the #e success factors of .- Soft$are)s sustaina*le
develop'ent in "ood 'ana"erial practices, application of international 3ualit standards for
soft$are develop'ent, and hi"hl 'otivated and s#illed $or#forces 4ased on the case stud,
$e discuss the sustaina*ilit of +ietna')s offshore soft$are outsourcin"
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1. Introduction
India)s success in the soft$are industr 'a#es 'an developin" and transitional econo'ies
follo$ the Indian $a that soft$are industr can pla a critical role in econo'ic develop'ent
(5idu'olu and Good'an, 6779 :o*it;sch et al, 20069
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the countr level
Given fierce co'petition in soft$are 'ar#ets, especiall rivalr a'on" offshore
outsourcin" destination countries, $e as# $hether +ietna')s initial success in soft$are
industr is sustaina*le in the future Indian co'panies succeeded not onl *ecause of lo$
la*our costs, *ut also *ecause of their a*ilit to continuousl 'ove up alon" the value chain
of soft$are industr (1ar'el and A"ar$al, 20029 :han et al, 200! -herefore it is $orth
as#in" $hat is re3uired to continue to develop soft$are industr -o ans$er these 3uestions,
$e identif the characteristics of +ietna')s soft$are industr develop'ent and ea'ine the
case of .- Soft$are to identif its success factors
or this research, $e collected secondar data throu"h the Internet, and then pri'ar data
throu"h intervie$s or the latter, t$o of the authors visited Hanoi and Ho 1hi
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and consolidatin" securit and defense (Lai, 200@!
4efore 678@, the teleco''unication sector had 'ana"ed s'all net$or#s $ith *ac#$ard
technolo" so as to have poor service 3ualit B$in" to the refor' polic, ho$ever, the
teleco''unication sector has defined a strate" for renovation, shiftin" fro' the su*sidi;ed
'echanis' to a 'ar#et oriented 'echanis' (Lai, 200@! After five ears refor' process fro'
678 to 6772, the teleco''unication sector had launched the JAccelerationK strate" for the
period *et$een 677 and 2000 (Lai, 200@!
-he Govern'ent of +ietna' resolution 5o >7 (677! on I1- develop'ent and .!
-he #e 'easures for soft$are industr develop'ent in +ietna' include a favora*le
invest'ent environ'ent, 'ar#et epansion, hu'an resource develop'ent, copri"ht
protection, and a sound teleco''unication infrastructure (&oun", 200>! -he result is that the
teleco''unication net$or# had *een co'pletel di"itali;ed and auto'ated -he 'ar#et had
*een developed $ith ne$ services and epanded the services to the rural areas (Lai, 200@!
+ietna')s I1- 'ar#et in 200D reached the a'ount of US 828 'illion, 207C up as t$ice
as the avera"e "ro$th rate of Asia .acific countries, in $hich "ro$th rate of hard$are $as
6D@C and that of soft$areservice $as >6>C Althou"h the "ro$th rate is not as hi"h as
200>, this $as still a re'ar#a*le "ro$th rate in the contet that "lo*al I1- spendin" increased
* C per ear (H1A, 200@!
Table +. Vietnam ICT )ar,et -)illion S/0
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Year Soft$areService Hard$are -otal Gro$th rate
2000 D0 2D0 00 /
2006 @0 280 >0 6C
2002 D 2D >00 6@C
200 60D >60 D6D 288C
200> 6>0 D>D @8D 0C
200D 678 @0 828 207C
Source H1A (200@!
-he 'onetar value of soft$areservice industr $as US 2D0 'illion in 200D, in $hich
US 680 'illion ca'e fro' do'estic 'ar#et (@66C! and US 0 'illion fro' outsourcin",
>C up co'parin" to 200> (-a*le D! Soft$are outsourcin" increased * DDDC, and
do'estic soft$areservice increased * >>C in $hich there $as a "reat contri*ution of
ne$l/e'er"in" Mdi"ital content industr) In 200D, online "a'es service increased stron"l
-he leadin" fir' in this 'ar#et, +ina"a'e reached over the threshold of US D 'illion per
ear +alue added services on cell phones also increased 3uic#l -he leadin" co'pan in this
'ar#et, +AS1, had the turnover of US 7 'illion per ear in 200D (H1A, 200@!
Table . Vietnam ICT Industry Value -million S/0
Year Soft$areService Hard$are -otal
&o'estic 'ar#et Butsourcin"=port -otal
2002 @D 20 8D DD0 @D
200 70 0 620 00 820
200> 62D >D 60 @0 70
200D 680 0 2D0 66D0 6>00
Source H1A (200@!
-he fast "ro$th rate of the Internet and teleco''unication in +ietna' has continued
durin" the period *et$een 200D and 200@ or 62 'onths, the Internet su*scri*ers had
increased * up to 80C
Table 2. 3rowt" rate of subscribers and users
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D200@ ,D>6,000 62,762,000
D200D 6,877,000 ,68D,000
D200> 6,62>,000 >,66,000
D200 >D0,000 6,07,000
Source H1A (200@!
&.( Vietnams Software Industry
-he develop'ent of I1- Industr, especiall soft$are industr, has *een seen as one of the
shortest $as to the +ietna')s industriali;ation and 'oderni;ation "oals, and 'a#es an
i'portant contri*ution to the national securit6(&oun", 200>!
In 2 'illion
-he value earned fro' the local 'ar#et accounted for US 28D 'illion (+I5ASA, 200!
Table 4. Vietnams software industry turno!er forecasted -on a!era$e0
1&irective 5o D81-/- on Bcto*er 6, 2000 of the 1entral 1o''ittee of +ietna'
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&o'estic turnover =port turnover -otal turnover ?e'ar#
(esti'ated!Year +alue
(@C
200@ 267 0C 606 D0C 26 DC
200 28D 0C 6> >DC >2 >C
2008 6 0C 26 >DC D8> D6C
2007 >@ 2DC 07 >DC 2 2C
2060 D7 2DC >2 >0C 6066 60C
Source +I5ASA (+ietna' Soft$are Association! 4rochure (200!
It $as in 677 that +ietna' first eported soft$are (Hon", 200D! Since then, the 3uantit
of soft$are eport has increased re'ar#a*l ear * ear +ietna'ese fir's are loo#in" for
'ar#ets for soft$are eport in USA, =U, and %apan -he value of soft$are eport is still
'odest, reachin" a*out US 6> 'illion in 200 (+I5ASA, 200!
Up to the ear 200D, there $ere a*out 2,D00 co'panies re"istered to run *usiness in the
soft$are sector, @00 of $hich $ere in operation, attractin" over 6,D00 people directl 'a#in"soft$are -he annual avera"e "ro$th rate of the enterprise nu'*er is a*out 0C Hanoi and
Ho 1hi 6C and D0C, respectivel (Hon", 200D! (-a*le 8!
Table 5. T"e 'stimated %umber of Software 'nterprises in Vietnam -&660
=sti'ation for soft$are enterprises
Location -he nu'*er .ercenta"e
Hanoi 280 >6C
Ho 1hi 0 D0C
Bther provinces @0 7C
hole countr @80 600C
Source Hon" (200D!
Bffshore soft$are develop'ent in the I1- $orld is the ter' used to descri*e the *usiness
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of outsourcin" soft$are pro"ra''in" and en"ineerin" services to contractors or $holl/
o$ned facilities located in forei"n countries $ith lo$er la*or costs 1urrentl, India is the
lar"est provider of such services -he 'ar#et is rapidl "ro$in" so that it is esti'ated to *e$orth US 26 *illion in 2008 $ith co'parison to US 60 *illion in 200 (Source I-AA9
3uoted fro' 1ar'el and -jia, 200D! ! In addition, +ietna'ese scientists are ver stron" in the fields of applied sciences such
as 'athe'atics and phsics, and the +ietna')s education sste' continues to produce hi"hl
3ualified "raduates (International I- Services, 2002!
Secondl, another *enefit of outsourcin" to +ietna' is socio/political sta*ilit Althou"h
still considered oppressive * $estern standards, +ietna' has proven to *e *oth sta*le and
secure and is $idel reco"ni;ed as Mle"iti'ate) * the $orld)s 'ajor trade nations 1linton
ad'inistration too# steps to nor'ali;e relations $ith +ietna', si"nin" a s$eepin" trade
a"ree'ent in 2000, and relativel positive relations $ith nei"h*orin" countries have also *een
pro'oted, particularl in the $a#e of recent concerns re"ardin" Indian projects *ein"
i'pacted * tensions $ith .a#istan (1ar'el and A"ar$al, 2002!, and further tensions on the
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:orean peninsula (Gallau"her and Stoller, 200>!
-hirdl, havin" local representatives that can effectivel operate across cultures can *e a
#e to the success of "lo*al projects such as offshore outsourcin" (1ar'el and A"ar$al,
20069 Adler, 20069 1o$ard, 200! +ietna')s painful past has ielded a resource $hich is
no$ helpin" to revitali;e the nation)s econo'9 that is, the +ietna'ese diaspora, #no$n as
Viet Kieu !
Lastl, it is $orth 'entionin" the +ietna'ese culture, $hich is rich in traditional values
or instance, loalt and custo'er service are valued 'uch 'ore than in other offshore
locals -here is also a fa'iliarit $ith =uropean and estern cultures as a result of the rench
rule in the earl part of the centur and the US influence 1atholicis' is also prevalent as the
second lar"est reli"ion in the countr (International I- Services, 2002!
In su', +ietna' has the four advanta"es for soft$are industr9 lo$ costs, sta*ilit,
overseas +ietna'ese, and national culture All these factors 'a#e +ietna' an attractive
destination for offshore I1- outsourcin" In the net section, $e are "oin" to ea'ine ho$ an
individual soft$are co'pan can levera"e these vinta"e points for their o$n *usiness
(. FPT Software
.- Soft$are, a su*sidiar of .- 1orporation (inancin" and .ro'otin" -echnolo"!, is
one of the fastest "ro$in" soft$are outsourcin" co'panies in +ietna' (+iet5a'5et 4rid"e200! (-a*le 7! It started as a soft$are division of .- 1orporation in 6787, and launched
soft$are outsourcin" *usiness in 6777 (.- Soft$are 200a!
Table 7. T"e corporate profile of FPT Software
1orporate 5a'e .- Soft$are %oint Stoc# 1o'pan (A su*sidiar of .- 1orporation!
Head3uarters HI-1 4uildin", Nuan -hu, 1au Gla, Hanoi, +ietna'
Su*sidiaries .- Soft$are %apan Ltd
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.- Soft$are Asia .acific .te Ltd
='ploees 6800 (as of
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Fi$ure &. 8e!enue by )ar,et of FPT Software
Source .- Soft$are (200a!
+ietna' is rapidl e'er"in" as the third 'ost popular destination for %apanese I1-
*usinesses in soft$are outsourcin" after 1hina and India (Nikkei Computer, 200! (i"ure !
-he +ietna' Soft$are Association (+I5ASA! forecasts +ietna')s eport of soft$are
products to %apan could reach a*out US D0 'illion * 2060 (Asia Times, 200@! .-
Soft$are has "ained a foothold in %apan $hich is a lar"e, sta*le and profita*le 'ar#et $orth
around US *illion annuall (
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Source %apan)s >@ *illion &on" (US >72 'illion! fro' 27D6 *illion &on" a ear
earlier (?euters 200! Li#e$ise, the revenue and the staff of .- Soft$are are * and lar"e
dou*led ear after ear It is 'ainl the result of hi"h 3ualit of .- Soft$are)s products and
services alon" $ith the international standards9 na'el, the
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.- Soft$are provides services such as soft$are develop'ent and 'aintenance, =?.
i'ple'entation, 3ualit assurance test, 'i"ration to
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services and hi"h 3ualit s#illed $or#force, *oth of $hich are orchestrated * "ood
'ana"e'ent practices 4ein" the fast/"ro$in" lar"est soft$are co'pan in +ietna', .-
Soft$are creates reputation and trust a'on" its custo'ers and investors (Puen, 200!
irstl, the 3ualit is represented * its co'pliances $ith international standard certificates
As .- Soft$are specialists "et 'ore than 00 international certificates of first/rate I1-
co'panies includin" H., I4
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enrolled in 200 1ourses are offered in *oth =n"lish and %apanese, and the Universit is
cooperatin" $ith 'ajor private fir's and universities, includin" I4
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*arriers and stren"thenin" service 3ualities -hus, $e can contend that .- soft$are)s success
depends 'ainl on the t$o factors, 3ualit control fro' co'plin" international 3ualit
certificates on the one hand, and s#illed and 'otivated $or#force on the other, *oth of $hichare orchestrated * 3ualit 'ana"e'ent practices
. Concludin$ 8emar,s
hat are the strate"ies that the +ietna'ese soft$are industr and individual co'panies in it
should ta#e for future sustaina*ilit in the 'ar#etR Since +ietna' satisfies so'e *asic
re3uire'ents for *eco'in" a co'petitive soft$are eport countr, it is i'portant to *uild up
trust $ith clients * i'provin" the 3ualit of services, lo$erin" the level of concerns so'e
clients have on the 3ualit, and 'ovin" up alon" the "lo*al value chain Ho$ever +ietna' is
still a developin" countr $here infrastructure and do'estic 'ust *e *uilt and fortified -his
deficienc can 'a#e its current and potential clients hesitate to start *usiness in +ietna'
If $e see the case of .- Soft$are, it is successful not onl *ecause it provides service at
lo$er costs, *ut also *ecause it has successfull *uilt trust $ith its clients -o overco'e the
pro*le' of lo$ service 3ualit, the co'pan offers internal trainin" courses for technical and
lan"ua"e s#ills, and 'eets international standard 3ualit sste's in ter's of *oth 3ualit and
protection of intellectual propert ri"ht
Pualit is considered as one of the 'ost i'portant factors of successfull 'ana"ed soft$are
co'pan, especiall in offshore outsourcin" *usiness, and can *e esta*lished * co'pan)s
capa*ilit and perfor'ance (5"uen et al, 200@! hat is re3uired for sustaina*le
develop'ent in soft$are *usiness is to 'eet the international standards of the "lo*al 'ar#et
-here have alread *een various trials in +ietna' to 'a#e itself an active participant in the
"lo*al soft$are 'ar#et -he "overn'ent of +ietna' has *een trin" to inte"rate +ietna' into
the $orld econo' throu"h joinin" *ilateral a"ree'ents and -B (-a, 200@!
So'e of +ietna'ese soft$are co'panies have achieved the 1
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socialist political sste', +ietna' has *eco'e a startlin" participant $ith its stron"
co'petitiveness in soft$are industr -he "overn'ent of +ietna' sees soft$are eport as a
"ood opportunit for its econo'ic develop'ent, and is providin" various incentives to attractforei"n fir's and construct a favoura*le environ'ent for soft$are industr
Ho$ever, one 'i"ht *e concerned a*out sustaina*le develop'ent of the +ietna'ese soft$are
industr 1o'petition $ill "et 'ore intense, as soft$are 'ar#et is also seen as an opportunit
to other developin" countries -o re'ain fir' in the "lo*al 'ar#et, +ietna'ese soft$are
co'panies should enhance the 3ualit level of its service and see# innovation, not just relin"
on its lo$ cost and lar"e pool of oun" $or#force In this perspective, this report su""ests ho$
+ietna'ese soft$are co'panies can overco'e their li'itations and *e a 'ajor plaer in the
"lo*al soft$are 'ar#et * ea'inin" the case of .- Soft$are Pualit 'ana"e'ent of .-
Soft$are can *e a "ood 'odel for other +ietna'ese soft$are co'panies $hich $ould li#e to
epand their *usinesses and $or# $ith *i" 'ultinational hi"h/tech fir's
-he li'itation of the current paper is that the findin"s co'e fro' onl one success case so
that further stud is re3uired to investi"ate other success cases found in +ietna', and to find
co''onalities a'on" the' -hen such findin"s $ill help us to understand the factors re3uired
to *e sustaina*le for soft$are *usiness not onl in +ietna', *ut also in other developin"
countries
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